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With this it will be convenient to discuss the following:
‘( ) The Chancellor of the Exchequer shall carry out reviews of the effects of the operation of the provision made by or under this Clause.
( ) The first review must be completed before the end of the period of five years beginning with the date on which section 45 of this Act, so far as it inserts this section, comes into force.
( ) Subsequent reviews must be completed before the end of the period of five years beginning with the date on which the previous review was completed.
( ) A report of each review must be laid before both Houses of Parliament.
( ) A report of each review must be made available to the Treasury Select Committee.’.
Clause 45 stand part.
Clauses 44 and 45, and amendment 13 relate to provisions for tax exemptions for non-UK resident competitors at major sporting events. Those provisions have made regular appearances in successive Finance Bills in recent years.
The provisions in clause 44 follow on from those considered in previous Finance Bills by providing for exemptions for the Sainsbury’s Glasgow grand prix event at Hampden Park in Glasgow. It is an IAAF diamond league fixture that takes place just two weeks before the Commonwealth games. The provisions in clause 45 introduce powers to make such provisions outside of primary legislation such as a future Finance Bill.
The issue was debated at length at the Committee stage of the 2012 Finance Bill. That lively discussion focused on the exemption from UK taxation of the income of non-resident footballers and team officials in relation to the UEFA champion’s league final. The issue stems from the landmark case of 2004 against the tennis star, Andre Agassi, in which HMRC was successful. The 2004 ruling meant that, in practice, the number of days that a foreign athlete or sportsman or woman spends training or competing in Britain in a year is apportioned on the basis of the proportion of events that an athlete trains and competes around the world. HMRC then uses that figure to calculate the percentage of global income that is taxable. If that is not correct, I am sure that the Minister will set out the correct details in his response.
The current situation has led to growing concerns that the UK may be seen to be closed to sport, thereby deterring organisers from considering the UK as a location for their event, and prompting sportsmen and women to question whether participation in an event staged in the UK should be included in their schedule. We therefore find ourselves in the situation where tax exemptions for sporting events have been dealt with on an ad hoc basis in Finance Bill to Finance Bill. As a result, some athletes and professional sportsmen and women have benefited from exemptions from some sporting events, while others have not.
The Finance Act 2006 provided for both income tax and corporation tax exemptions at the 2012 London Olympic and Paralympic games. The Finance Act 2011 provided for income tax exemptions for the 2011 champion’s league final at Wembley, while the Finance Act 2012 made similar provisions for last year’s champion’s league final at Wembley if either team were foreign—of course. The Finance Act 2013 provided for income tax exemptions at last year’s London anniversary games, and at this year’s Glasgow Commonwealth games, which the then Economic Secretary, the right hon. Member for Bromsgrove (Sajid Javid), said would encourage
“world-class athletes to take part in each event”,
which the Government saw as a “key objective”.
As my hon. Friend the Member for Kilmarnock and Loudoun pointed out in last year’s Finance Bill Committee, those piece-by-piece provisions have been fluid and have changed from event to event. She said that that had created either a real or a perceived unfairness and that, of most concern, it had led to uncertainty for participants in events, organisers, officials, fans and spectators who want to compete in or watch major sporting events in the UK. Clause 44 continues the event-by-event approach by providing for an income tax exemption for non-UK resident accredited competitors at the Glasgow grand prix athletics event in respect of any income arising from the event.
Returning to a similar debate in last year’s Committee, the then Economic Secretary, whom have I have already quoted, stated that the main driving factor behind the exemptions was to secure elite international events that otherwise would not be possible, saying:
“The Government’s policy is that such tax exemptions are provided when they are a requirement of the bidding process to host an international sporting event at the highest level of world sport. That is why, for example, exemptions were provided for the Olympic games in 2012 and the champions league final in 2013 at Wembley stadium.”––[Official Report, Finance Public Bill Committee, 16 May 2013; c. 160.]
I am sure the Minister this afternoon will confirm that securing another diamond league grand prix in Glasgow shortly before the city hosts the Commonwealth games was contingent upon the exemptions provided for in clause 44.
As I have outlined, successive Ministers have made clear—and have been supported by the Opposition—that, aside from meeting bidding requirements, these exemptions are necessary to attract world-class sportsmen and women to compete in events in the UK. According to an article in The Scotsman last week, Usain Bolt will “almost certainly” be taking part in the Sainsbury’s Glasgow grand prix at Hampden park. That event is taking place just two weeks before the Glasgow Commonwealth games, in which the article reports it is “95% certain” that Usain Bolt will also compete. The article cites
“dispensation from taxes and all that sort of thing”.
The consequence of provisions in clause 44 is one of the main reasons why the organisers are so confident that the Olympic champion will be there. Perhaps the Minister can comment further on the speculation and enlighten the Committee on any information he might have about Usain Bolt competing in the games. It would be useful if the Minister could share any inside knowledge.
Clause 45 and our amendment 13 address this piecemeal legislation relating to sporting events and the fact that the issue recurs at every Finance Bill. It was announced at Budget 2014 that a power would be introduced to allow provisions to be made for income tax and corporation tax exemptions for major sporting events, using secondary legislation instead. According to the explanatory notes the clause introduces a new power to allow the Government to make provision “by Treasury regulations” for income tax and corporation tax for major sporting events, thereby unfortunately removing the need to debate these issues every year in the Finance Bill Committee. The clause provides that regulations made under this power must be approved by resolution of the House of Commons. The Government have said:
“This will allow for more flexibility whilst retaining parliamentary scrutiny of any proposed exemption or provision.”
Perhaps most interestingly, the background note sets out the criteria by which the Government plan to grant certain exemptions for sporting events, while no similar details are provided in any other document—to the best of my knowledge, although I am happy for the Minister to correct me. That suggests that exemptions will be granted only if the event is
“world-class, internationally mobile, and where exemption by the host country is a requirement of a bid to host the event”.
Although Ministers have made clear before that such provisions are often demanded as a condition of the event being held in the UK—the previous Labour Government agreed to make similar provisions ahead of the London Olympic and Paralympic games—I do that the definitions set out in the explanatory notes warrant further clarification. It would seem that a number of world-class sporting events held in the UK would be eligible under these guidelines, for which the Government have previously rejected tax exemptions.
For example, the IAAF diamond league series is widely seen as the highest level of athletic competition outside of international championships. There are 14 diamond league meetings being held across the world this year, two of which are taking place in the UK, at Glasgow and Birmingham, with Glasgow of course receiving the tax exemptions. In view of the criteria, surely the Sainsbury’s Birmingham grand prix is equally internationally mobile—it could be taken elsewhere in the world. Indeed, it is certainly a world-class event and, now that the Government have granted tax exemptions for the other two UK-based diamond league events, the precedent is there to grant a similar exemption.
I know some detail about the bidding for diamond league events such as the event in Birmingham that my hon. Friend has mentioned. Gateshead stadium has hosted diamond league events in the past and the UK faces hot competition in attracting such events, which are intensely important to the world athletics circuit. Unfortunately, that stiff competition means that, unless we have exemptions, there is a real danger that such events will go to other European cities.
My hon. Friend raises an important point. As a fellow north-eastern MP, I know that not only are these important sporting events, but that the areas that win the bid to host them see major economic consequences. There appears to be a lack of clarity and, therefore, either real or perceived fairness in the way the exemptions are granted.
The hon. Member for Gateshead made a powerful point. In our debates in the Finance Bill Committee in 2012, I had doubts about these exemptions; however, having thought about it, I think the ferocity of the international competition for these events means that a strong case can be made for them. People will come here and spend money, and some of that spending will result in extra tax revenue for the UK. There is a serious issue: we are in an international, competitive marketplace and we need to do everything we can to grow our economy.
This issue was put to the then Economic Secretary—now the Secretary of State for Culture, Media and Sport—who suggested that the Government’s policy for tax exemptions was in part to build on the Olympic legacy and to support athletic competitions that include para-athletic events. With specific reference to the Birmingham grand prix, he said:
“The London anniversary games and the Glasgow Commonwealth games 2014 are both exceptionally placed to build on the Olympics’ legacy. For example, both events will not only be multi-sport, but will include para-athletic events, which is not usually the case for the diamond league. It is in order to keep promoting the legacy of the Olympics that we have provided special treatment here and not for a similar event in Birmingham.”—[Official Report, Finance Public Bill Committee, 16 May 2013; c. 160.]
In the light of the Government’s decision to grant exemptions for another British diamond league grand prix and the fact that events such as the Birmingham diamond league grand prix now seemingly meet the criteria for future exemptions as outlined in the explanatory notes, will the Minister today restate the Government’s position? Are they still of the view that the London anniversary games and the Glasgow grand prix warrant special circumstances as they build on the Olympic legacy and include para-athletic events? If so, should the eligibility criteria for future exemptions not make that clearer?
Can the Minister say what other future sporting events he envisages becoming eligible for tax exemptions for non-resident competitors as a result of this clause? Do the Government plan to extend the number and range of events that are eligible for such exemptions beyond football, athletics and the Olympic and Commonwealth games?
There is a great deal of uncertainty surrounding this deal, so amendment 13 would commit the Government to review these questions and, more importantly, decisions that they will take over the next five years on tax exemptions to ensure effectiveness. As we set out, since the Olympic and Paralympic games—but by no means ending with them—not only has the UK become an increasingly important destination for international sporting events, but the Treasury has found itself reacting on a case-by-case basis to tax decisions on such events, which are becoming a more regular feature on the UK sporting calendar. Amendment 13 would ensure that the Treasury never had to catch up with events because it would keep them constantly under review. To expand the debate outside the remit of the Committee—not that I underestimate the valuable contribution that all hon. Members make to the debate—amendment 13 also seeks the views of the Treasury Committee and its expertise as part of these five-yearly reviews.
Does my hon. Friend agree that sport can bring regeneration to our regional economies? In the late 1990s, as a serving Manchester city councillor, I stood on the steps of the Manchester velodrome that we had built as a precursor to bidding for the 2002 Commonwealth games. It was built on a bleak, desolate, many-acre site to the east of the city that had been de-industrialised in the 1970s and 1980s due to structural economic change. The development was labelled as the greatest white elephant in Britain by some of the press, but if Manchester velodrome had been a country at the 2012 Olympic games, it would have come seventh in the medal table. The development led to the building of the City of Manchester stadium, the national taekwondo centre, the national squash centre and the national hockey centre, so my hon. Friend is putting forward an essential argument.
My hon. Friend gives an example of the eminent contributions that Committee members make to the debate. He also pre-empts a point I am about to make, which my hon. Friend the Member for Kilmarnock and Loudoun raised in last year’s Finance Bill Committee. Two years ago, the Government cited a MasterCard study that estimated that, having lost out on hosting the 2010 UEFA champions league final in London, in part due to the UK’s tax law, when the 2011 UEFA champions league final was held at Wembley, it yielded £45 million for the London economy. That is clearly not to be glossed over. Indeed, in Manchester, Birmingham and many parts of the country, we have seen the huge value that such sporting events bring to various parts of our economy.
As a Newcastle MP, I could not help but cite figures from the local inward investment agency, NewcastleGatestead Initiative, which show that tourism’s contribution to the economy increased by £400 million, or 8%, between 2011 and 2012. A large part of that increase can be attributed to the Olympic football matches that were hosted at St James’ Park. We are looking forward to the prospect of hosting three matches in the 2015 rugby world cup which, by some estimates, could boost the north-east’s economy by more than £14 million, as about 50,000 overseas fans are expected to visit the region during the tournament.
What assessment has the Minister made of the economic benefits of sporting events to the national and local economies? Has any analysis been carried out of the economic benefits to Glasgow and the UK of staging the Commonwealth games and the Glasgow grand prix? Has any comparison been made between the effects of providing tax exemptions for such events and not doing so? Equally critically, do the Government have any plans to carry out such assessments when deciding whether to expand the number of events eligible for tax exemptions?
Those questions are the essence of amendment 13, which is a reasonable provision that would ensure that we have fully informed and timely reviews of UK tax policy that is consistent with the Government’s stated aims of continuing the London 2012 Olympic and Paralympic legacy, and making the UK one of the premier sporting locations across a multitude of sports, given the social and economic benefits that such events bring. I urge the Committee to support the amendment.
Clause 44 provides an income tax exemption for non-UK resident competitors on any income received as a result of their performance at the Glasgow grand prix 2014, or as a result of any activities in the UK between 5 July and 14 July 2014 to support or promote that athletics event. As we have heard, clause 45 introduces a new power that will allow the Government to give exemptions from income tax and corporation tax for specific sporting events held in the UK.
On clause 44, hon. Members will be aware that the Government introduced exemptions for some highly successful major sporting events in recent years, including the London 2012 Olympic and Paralympic games. The Government’s policy is to consider providing a tax exemption for internationally mobile events at the top level of world sport when that is a necessary condition of the bid, or in exceptional circumstances when there is an opportunity to prolong the legacy of the London 2012 Olympic and Paralympic games. The Government will therefore provide an income tax exemption for non-UK resident competitors at the Glasgow grand prix 2014 on an exceptional basis.
The changes made by clause 44 will provide an income tax exemption for non-UK resident competitors that will apply to appearance fees, prize money and endorsement income related to a performance at, or to support and promote, the Glasgow grand prix between 5 July and 14 July 2014. The exemption will not be for UK residents, nor will it be for non-competitors such as officials, sponsors or coaching staff. The Glasgow grand prix will be a two-day athletics and para-athletics competition at Hampden Park stadium. The cost of providing the exemption will be negligible and is likely to be offset by the economic benefits of raising the profile of the games.
As we heard from the hon. Member for Newcastle upon Tyne North, the Government have introduced exemptions for highly successful major sporting events in recent years, and debates on such exemptions are often the highlight of Finance Bill Committees. The bad news is that clause 45 means that it will no longer be necessary to use the annual Finance Bill to make exemptions or other provision. Instead, the Government will make future exemptions through statutory instruments. Hon. Members will be pleased to hear, however, that there will still be opportunity for debate, as such regulations will be subject to the affirmative procedure. They should contact their Whip to express their interest in participating in such debates.
The way in which the Government consider whether to grant exemptions will not be changing, just the process. The Government will still consider whether an event is world class and internationally mobile, and whether the exemptions are part of the conditions of a bid to host the event. The Government will also consider exemptions when, as for the London anniversary games, an event is exceptionally well placed to prolong the legacy of the highly successful 2012 Olympics and Paralympics.
As we heard from the hon. Lady, the Opposition have tabled an amendment to clause 45 that would require the Government to undertake regular five-yearly reviews of the effects of that clause. Although I commend hon. Members for their zeal in seeking to establish the effectiveness of Government policy, I cannot support the amendment. The Government review all tax policy in the appropriate place and at the appropriate time. Requiring reviews to be published for specific periods is inefficient and arbitrary. The Government might use the power only once in the next five years, for example, so undertaking to publish reviews to such a schedule would not be proportionate. Furthermore, the Government have already set out their view of the clause’s effect in the tax information and impact note, which was published by HMRC in “Overview of Tax Legislation and Rates.” Similar assessments will be published on later policy changes as and when they occur.
I apologise for interrupting the Minister’s flow, and I appreciate that he believes that the Government do not need any help in formulating good policy. Perhaps he is about to explain this, but there is a lack of certainty in the existing guidelines and explanatory notes setting out the criteria. Why was the competition in Glasgow granted an exemption when the competition in Birmingham was not? How will things work under the new rules and guidelines?
I hope that I can reassure the hon. Lady by turning to those questions immediately. First, there is no change in policy. We will continue to consider exemptions for those events that meet the criteria which, as I have already stated, include whether an exemption is a necessary condition of a bid to host an internationally mobile event at the top level of world sport, or the exceptional circumstances that an event is an opportunity to prolong the legacy of the London 2012 Olympic and Paralympic games.
Specifically on diamond league events—and on why the Glasgow event is covered, but a similar event in Birmingham was not—the Glasgow grand prix will help to support the 2014 Glasgow Commonwealth games in maximising the legacy of the London 2012 Olympic and Paralympic games and spreading that legacy to Scotland. The situation needs to be put in that context. We therefore think it is wholly appropriate to support that athletic and para-athletic event. Unlike the Glasgow grand prix, and the London anniversary games, the Birmingham event does not have a para-athletic element, so it does not meet the Government’s policy criteria.
It is worth pointing out that there are 14 diamond league events each year, two of which are hosted in the UK. They will be hosted in the UK in the future whether or not the exemption is provided. The Glasgow event is connected with the Commonwealth games, which we see as a way of continuing the Olympic and Paralympic legacy, which is why the exemption has been granted in that case.
I appreciate the Minister’s explanation, but he has not really explained the new guidelines—if they can be called that—or the explanatory notes setting out the criteria. They do not necessarily include the criteria to which he refers as the basis for the decision in the Glasgow case. There still seems to be uncertainty about what will happen in the future, and it is important to establish as much certainty as possible at this stage.
I think that I am being clear, but I will have another go. The policy criteria for tax exemptions fall into two categories: first, when an exemption is a necessary condition of a bid to host an internationally mobile event at the top level of world sport; and, secondly, the exceptional circumstances of an opportunity to prolong the legacy of the London 2012 Olympic and Paralympic games. We believe that the Glasgow grand prix falls into the second category, especially given the connection with the Commonwealth games and the fact that it is an athletic and para-athletic event. There has been no change in policy.
The hon. Lady asked about the economic benefits to Glasgow of hosting the event. No assessment has been made of the economic benefits, but it is worth drawing a parallel with the London anniversary games, the direct economic impact on London of which was £15.2 million. To be fair, that was a three-day event while the Glasgow grand prix will be two-day event for which fewer tickets are available, but I hope that that gives a helpful indication.
The hon. Lady wonders whether Usain Bolt will compete, but I cannot answer that question. I also doubt that I will receive inspiration on that point. However, I suspect that Usain Bolt is following these events closely, and I have no doubt that as soon he receives a copy of the Official Report of this debate, he will contact the hon. Lady directly to reassure her about whether he will attend.
The hon. Lady raised a number of queries about the policy, as it was appropriate for her to do, given her role. I thank her for her broad welcome for the Government’s approach to offering exemptions in such circumstances so that, for highly mobile individuals who have choices about where they locate, we have a competitive tax system that ensures that they will come to the UK. I am glad that she has taken that approach. She could have categorised the measures as a tax cut for millionaires, and she would probably have been right. None the less, I was delighted that the Opposition were supportive of the proposals, because it is important that we have a competitive tax system that attracts jobs and investment to the UK, which is exactly what we are doing. I hope that the Committee will support clauses 44 and 45 and that I have persuaded her to withdraw amendment 13.